How Taxes Work - Bar Stool Economics

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Something the lower/middle classes should understand. Add this to the fact that people like to vote themselves into more benefits and are so willing to get into debt to have what they want but can't afford, and you can see why we are in the mess we are in.
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Taxes simplified...

Taxes (and how to understand them) when related to a Bar Bill


Bar Stool Economics

Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it
would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men drank in the bar every
day and seemed quite happy with the arrangement, until one day, the
owner threw them a curve. 'Since you are all such good customers,' he
said, 'I'm going to reduce the cost of your daily beer by $20. Drinks
for the ten now cost just $80.

The group still wanted to pay their bill the way we pay our taxes, so
the first four men were unaffected. They would still drink for free. But
what about the other six men - the paying customers? How could they
divide the $20 windfall so that everyone would get his 'fair share?'

They realized that $20 divided by six is $3.33. But if they subtracted
that from everybody's share, then the fifth man and the sixth man would
each end up being paid to drink his beer. So, the bar owner suggested
that it would be fair to reduce each man's bill by roughly the same
amount they were currently paying, so he proceeded to work out the

amounts each should pay. And so:

The fifth man, like the first four, now paid nothing (100% savings)
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. The first four continued
to drink for free. But once outside the restaurant the men began to
compare their savings.

'I only got a dollar out of the $20,' declared the sixth man; he pointed
to the tenth man,' but he got $10!'

'Yeah, that's right,' exclaimed the fifth man. 'I only saved a dollar, too.
It's unfair that he got ten times more than I did.'

'That's true!!' shouted the seventh man. 'Why should he get $10 back
when I got only two? The wealthy get all the breaks!'

'Wait a minute,' yelled the first four men in unison. 'We didn't get
anything at all. The system exploits the poor!'

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat
down and had beers without him. But when it came time to pay the bill,
they discovered something important. Between them all, they didn't have

enough money for even half of the bill!


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And that, boys and girls, journalists and college professors, is how our
tax system works. The people who pay the highest taxes get the most
benefit from a tax reduction. Tax them too much, attack them for being
wealthy, and they just may not show up anymore. In fact, they might
start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia
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For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
__________________




"The FACTS are always subject to CHANGE once the TRUTH is applied"
"In the entire history of man the only stupid questions are the ones that don't get asked"

john317(AKA Gary the Old guy) wrote:

For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
__________________

How true.

Article was great, very good analogy.

KevinP (Stabby McShankyou) wrote:
and I'm NOT a pedo. everyone knows i've got a wheelchair fetish.

good read

I love you I really do. Thank you so much for explaining it even if you didn't write it. This is just made my whole week I mean it.

By the way its true it really is.


The proper way of using the word seen. It is not I seen it that would be I saw it. He has seen the car is the right way to use the word. English class is Cool. By the way thats my sig

I wish more people understood this. This is exactly how the left can say the bush tax cuts benefit the rich when infact I looked it up and I benefited from them too. Infact evryone benefited from them right down to the people who got back more than they paid in.



FORGET GIRLS GONE WILD WE HAVE GOVERNMENT SPENDING GONE WILD!

How sad that you don't even realize that the man who takes in 90% of the money is paying $5. Warren Buffet - Richest Man in the World - dared ANY CEO of any company to prove he pays a higher tax rate than his secretary - do so and get a free $1,000,000. So far... no takers.

So allow me to now cry a river for those poor desolate elite rich people.




Naturally the common people don't want war; neither in Russia, nor in England, nor in
America, nor in Germany. That is understood. But after all, it is the leaders of the
country who determine policy, and it is always a simple matter to drag the people along,
whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist
dictatorship. Voice or no voice, the people can always be brought to the bidding of the
leaders. That is easy. All you have to do is to tell them they are being attacked, and
denounce the pacifists for lack of patriotism and exposing the country to danger. It works the
same in any country. - Hermann Goring

Bah, this is just more numbers crunching. Percentages are all well and nice but they don't account for one simple thing. How much the richest people pay in relationship to their income.

Rich people, on average, are in the 50% tax bracket. That means that half their earnings go straight to the government. The idea that rich people pay nothing is ridiculous, of course they pay. Bill Gates pays more in taxes per year than every single member of the Org combined.

However, if you're making ten million a year and pay 5 to Uncle Sam, you've still got 5 million. But if Joe Schmo, who makes 25,000$ a year, pays 3000$ in taxes that may just be 8.3% but it's a hell of a sting.

I make 14$ an hour and pay about 24% of my salary in taxes, living in Canada. Government gives me nothing back and usually, I even have to give an extra 300-400$ a year. Trust me, I'm paying for my damn beer.

I'm glad to know there are more people out there that get it.

Now let's add another dynamic that the left continues to downplay:

Businesses:
Obama wants to roll back the tax cuts on businesses. This will average somewhere in the neighborhood of $100,000 increased taxes on a business (I don't remember the exact figure, and don't feel like looking it up). Now let's consider how business operate: when costs of any kind increase, they have two options: find ways to offset that increase with cuts elsewhere, which is usually the way they go, or increase prices of their products or services. How do these affect the middle class, that Obama accuses the Republicans of ignoring? Well, increased prices mean that people either pay more, resulting in their money not going as far, or they can no longer afford some of these things at all. When companies begin cutting costs, 99% of the time, they result in labor cut-backs. If the average company has to make up for $100,000 in increased cost with labor cut-backs, this will result in the loss of jobs in that sector, on average, 1-3 per company. Exactly how does everyone think this will affect the economy?

SHHHHHHHH!!!! People don't want to hear the common sense truth.

You know they aren't going to listen because companies are EVIL.

Bad Corporations they have no souls they just miraculously appeared they didn't start small and grow through intelligent choices hard work and good business. NO they appeared the devil made them. White men got together and said lets make something that can make a bigger economy and things better and cheaper for people and at the same time lets make it evil and terrible.

You all are dumb you get rid of corporations you all WILL LOSE. If you don't understand that read a book I know evil corporation don't carry them but my tax dollars pay for libraries so use it.


The proper way of using the word seen. It is not I seen it that would be I saw it. He has seen the car is the right way to use the word. English class is Cool. By the way thats my sig

The only problem with that analogy is this:

It forgets to take into consideration, hypothetically speaking, that the 10th man would pay for the bar's liquor license, and in an under-the-table exchange the bar would buy beer from man 10's brewery exclusively.

And other such things. It's not quite just a number's game, there's a lot going on behind the scenes.

My complaint is not that the "rich" get a bigger tax cut based on percentage when cuts are doled out. My complaint is that the cuts aren't in any proportion, nor do the rich necessarily pay taxes and always try to find some umbrella tax shelter so they don't pay their fair share.

But by bigger complaint is that there is no anal-rooter level of audit on the politicians and the companies that are beyond a doubt benefitting from graft.

Any way you slice it--the system is screwed.


Goodbye Callisto & Skaði, Hello Ishara:
2022 Kia Stinger GT2 AWD
The only thing every single person from every single walk of life on earth can truly say
they have in common is that their country is run by a bunch of fargin iceholes.

[quote=Keeper Of The Light™ (Strazca)]

It forgets to take into consideration, hypothetically speaking, that the 10th man would pay for the bar's liquor license, and in an under-the-table exchange the bar would buy beer from man 10's brewery exclusively.


And the brewery would be taxed as a corporation and supports the welfare of the first two men and their 4 or 5 welfare babies and crackhead mothers.

True

So if the system is screwed maybe we should change it.

So look up the FAIR TAX. That is fair people are taxed only on what they spend holy Sh*( that would be great. It may even have encouraged people to save some of their money instead of spend it.


The proper way of using the word seen. It is not I seen it that would be I saw it. He has seen the car is the right way to use the word. English class is Cool. By the way thats my sig

M-1 Erma Jean wrote:True

So if the system is screwed maybe we should change it.

So look up the FAIR TAX. That is fair people are taxed only on what they spend holy Sh*( that would be great. It may even have encouraged people to save some of their money instead of spend it.

problem with changing it is someone will always fee like they are being screwed. so they all disagree, and if someone does come out with something good the opposition will oppose it just to keep them for getting credit of atually fixing it.


http://www.flickr.com/photos/sndsgood/ https://www.facebook.com/#!/Square1Photography

I hate how we're taxed on labor!!! IT'S A DIRECT TAX! Isn't that unconstitutional?

wysiwyg wrote:i would say they bang, they don't really pound so much. but if
you want to bump, then they will bump and hit real hard and a lot good.

LOL

Almost all taxes actually are unconstitutional. Thats why Adams was so against it in the first place.


The proper way of using the word seen. It is not I seen it that would be I saw it. He has seen the car is the right way to use the word. English class is Cool. By the way thats my sig

M-1 Erma Jean wrote:True

So if the system is screwed maybe we should change it.

So look up the FAIR TAX. That is fair people are taxed only on what they spend holy Sh*( that would be great. It may even have encouraged people to save some of their money instead of spend it.

So called "fair tax" is one of those misleading labels just like the "patriot act" which has nothing to do with being patriotic. It it is on paper quite fair but in practice it shift the tax burden down the economic ladder.

Consider this -
1. Very poor people spend 100% of their money. Saving isn't really an option even if they do have some sense of financial responsibility - and most do not. They will therefore be taxed on 100% of their earnings.
2. Poor people aren't much better off - they will spend most all their money - likely because they don't have much of an option. Higher bills, gas, and inflation are a bitch. They will be taxed on most all - if not all - of their income.
3. Middle class people can afford to - and usually do - put some back. They have their necessities and a few luxuries. Rising costs on everything means that the middle class is moving more into the poor category though. They will be taxed on a smaller but still quite significant chunk of their income.
4. Rich people have everything they need and plenty that they do not - they need only spend a small percentage of their income and can/do save/invest the vast majority of their income and accordingly they will only be taxed on a small minority of their income.
5. Uber-rich people have it all and spend what would seem like alot to you and me but really represents a very minimal percent of their income. They will therefore be taxed on almost none of their income and so be free to accumulate plenty more wealth.

Quote:

That would be great. It may even have encouraged people to save some of their money instead of spend it.

So you WANT to crash our economy?! Because it is SPENDING - not saving - that stimulates the economy. It is smart on a personal level to save, but I want everyone else to spend like a drunken sailor!! Nothing is better for the economy than reckless spending. More things being sold means more profit for companies and therefore more people needed to make, ship, and sell that merchandise. Likewise - more savings = less spending = less jobs needed to produce, ship, and sell merchandise.

And as I mentioned above - If you give a poor person $5 then that is $5 more that is getting spent into our economy. The best thing you can do is give more to the poorest(not to mention they need it the most anyways) because they will spend it all(even if they waste it on 40s and spinners - it still helps the economy none-the-less). Distributing it to those who have the most is completely backwards("trickle down economics" is a joke). You don't get rich by spending all your money. You get rich by getting everyone else to spend all of theirs.




Naturally the common people don't want war; neither in Russia, nor in England, nor in
America, nor in Germany. That is understood. But after all, it is the leaders of the
country who determine policy, and it is always a simple matter to drag the people along,
whether it is a democracy, or a fascist dictatorship, or a parliament, or a communist
dictatorship. Voice or no voice, the people can always be brought to the bidding of the
leaders. That is easy. All you have to do is to tell them they are being attacked, and
denounce the pacifists for lack of patriotism and exposing the country to danger. It works the
same in any country. - Hermann Goring

"Quote:

That would be great. It may even have encouraged people to save some of their money instead of spend it.
So you WANT to crash our economy?! Because it is SPENDING - not saving - that stimulates the economy. It is smart on a personal level to save, but I want everyone else to spend like a drunken sailor!! Nothing is better for the economy than reckless spending. More things being sold means more profit for companies and therefore more people needed to make, ship, and sell that merchandise. Likewise - more savings = less spending = less jobs needed to produce, ship, and sell merchandise.

And as I mentioned above - If you give a poor person $5 then that is $5 more that is getting spent into our economy. The best thing you can do is give more to the poorest(not to mention they need it the most anyways) because they will spend it all(even if they waste it on 40s and spinners - it still helps the economy none-the-less). Distributing it to those who have the most is completely backwards("trickle down economics" is a joke). You don't get rich by spending all your money. You get rich by getting everyone else to spend all of theirs. "



i think the biggest problem though, is people arn't spending their money, they are buying on credit, buying on credit is diffrent then spending your own money, allot of this countries problem is that we owe so much on credit.



http://www.flickr.com/photos/sndsgood/ https://www.facebook.com/#!/Square1Photography

thats the point they dont HAVE the money to buy the things they NEED, so they have to use credit...



"There is no point in looking fast if your not."

An interesting thing on this:

Since it's pretty much de facto that all levels of politiciancs are involved with graft, why not just do this: no taxes--let the government work off of tips.

After all, that's pretty much what goes on now. Congresses votes are bought and sold not on the will of who they represent, but on who pays them off.

At least that way more money is kept to the little person to stimulate the economy, while the government is payed by bribes, like usual.


Goodbye Callisto & Skaði, Hello Ishara:
2022 Kia Stinger GT2 AWD
The only thing every single person from every single walk of life on earth can truly say
they have in common is that their country is run by a bunch of fargin iceholes.

[quote=Keeper Of The Light™ (Strazca)]An interesting thing on this:

Since it's pretty much de facto that all levels of politiciancs are involved with graft, why not just do this: no taxes--let the government work off of tips.

After all, that's pretty much what goes on now. Congresses votes are bought and sold not on the will of who they represent, but on who pays them off.

At least that way more money is kept to the little person to stimulate the economy, while the government is payed by bribes, like usual.



that might actually force some of the unemployed to get off their buts to find a job.


http://www.flickr.com/photos/sndsgood/ https://www.facebook.com/#!/Square1Photography

My still biggest question to this stupid numbers game is that if 50% are drinking for free why do we have children on the street starving. Did anyone also think that the men are drinking for free because they had to pay the top 50% for their housing, cars, food, etc...

These are inside the box economics. Throw a few more models into the bar and it falls apart, ends in a brawl and we start invading the gay 7-eleven across the street because it can't be something wrong with our bar it has to be their fault...Holocaust, Iraq... anyone?

Taxes are your payment for living in our society. A man who makes 10 million isn't going to have to worry about where his next meal comes from if 50% of that is given to the government and he has more than likely found a loophole so he's paying maybe 25% or less of that.

Next problem you people don't get is that its not about the individual its about the society. Those who are blessed with wealth SHOULD help those less fortunate.

When you help others you help yourself and everyone. This may point out a simple personal financial equation but it neglects to point out the benefits of giving everyone the base needs to live.

I'll be the first to admit I'm a socialist. I make less than 250,000 a year and I'm still willing to pay more in taxes if it mean that my child and others like him didn't have to worry about healthcare or the basic necessities of life. I consider it paying back to a society that has done so much for you and enabling you to achieve your wealth.


-Chris

IamRascal wrote:I'll be the first to admit I'm a socialist. I make less than 250,000 a year and I'm still willing to pay more in taxes if it mean that my child and others like him didn't have to worry about healthcare or the basic necessities of life. I consider it paying back to a society that has done so much for you and enabling you to achieve your wealth.

The problem with socialism is that it ends up striating the classes even more than they are now. Way too much control over everyone and their finances, and it's even harder for you to move up the ladder. The entire redistribution idea only sounds good when you're at the very bottom. When you look at what it does to an economy, you will realize that it makes the people in power more powerful, and makes everyone else powerless.

The problem, Quick/Rascal, is not the inherent flaws of whatever the financial system is du jure, the flaw is humanity itself.

My hyponthesis is that human by nature are only minorly social creatures. We operate best in small family units that are generally no more than about 10-20 people. We're not biologically and neurologically equipped to live in a multi-thousand or multi-million ultra-social hive mindset.

If we were equipped to do so, we'd be biologically equipped to handle the role in society, have no real yearnings to be something we're not, and the "upper strata" of society would be fully socialistic because they'd know that without the lower strata, they couldn't survive at all. Ultra-social organisms operate pretty much as a multi-organism life-form. Humanity, if we look at it in that light, not only has a really poor control structure, but would be filled with cancerous growths and diseased beyond belief. It would be the equivalent of the brain hoarding all of the food and nutrients for itself, and when the muscles or bones try to get some noursihment for themselves, they send the immune system to destroy it, despite the fact that the brain couldn't get the nutrients it needs without the bones and muscles.

Somewhere way back, we basically overstepped our niche and got into a role we're ill-equipped to handle.

How does this tie back? Unless the very underpinnings of the system change, along with human attitudes, it won't matter if weren't capitalists, socialists, communists, or whatever, we're screwed no matter what.


Goodbye Callisto & Skaði, Hello Ishara:
2022 Kia Stinger GT2 AWD
The only thing every single person from every single walk of life on earth can truly say
they have in common is that their country is run by a bunch of fargin iceholes.

LOL. And people think I'm cynical.

You say "Cynical" like it's a bad thing. Besdies, it's a well known fact that I've been one of the most cynical people on this board since I first joined.


Goodbye Callisto & Skaði, Hello Ishara:
2022 Kia Stinger GT2 AWD
The only thing every single person from every single walk of life on earth can truly say
they have in common is that their country is run by a bunch of fargin iceholes.